With permission, I would like to make a statement on the future of community pharmacy. In December 2015, the Government set out a range of proposals for reforming the sector. Our intent was to promote movement towards a clinically focused pharmacy service that is better integrated with primary care and makes better use of pharmacists’ skills. I now wish to update the House on the outcome of this consultation and the measures we intend to take forward.

Let me be clear at the outset. The Government fully appreciate the value of the community pharmacy sector. There are now more than 11,500 pharmacies, an increase of over 18% in the past decade. Indeed, the overall pharmacy spend has increased by 40% over the past decade and now stands at £2.8 billion per annum. However, we do not believe that the current funding system does enough to promote either efficiency or quality; nor does it promote the integration with the rest of the NHS that we, and pharmacists themselves, would like to see.

The average pharmacy receives nearly £1 million per annum for the NHS goods and services it provides, of which about £220,000 is direct income. It includes a fixed-sum payment—the establishment fee—of £25,000 per annum which is paid to most pharmacies, regardless of size and quality. This is an inefficient allocation of NHS funds when 40% of pharmacies are now in clusters of three or more, which means that two fifths are within 10 minutes’ walk of two or more other pharmacies. There are instances of clusters of up to 15 pharmacies within a 10-minute walk of each other. When the overall NHS budget is under pressure and we need to find £22 billion in efficiency savings by 2020, it is right that we examine all areas of spend and look for improvements.

The measures that we are bringing forward today have at their heart our desire more efficiently to spend precious NHS resources. Community pharmacy must play its part as the NHS rises to this challenge. I am today announcing a two-year funding settlement. In summary, contractors providing NHS pharmaceutical services under the community pharmacy framework will receive £2.687 billion-worth of funding in 2016-17 and £2.592 billion in 2017-18. That represents a 4% reduction in 2016-17 and a further 3.4% reduction in 2017-18. Every penny saved by this re-set will be reinvested and reallocated back into our NHS to ensure the very best patient care.

Furthermore, separately commissioned services by NHS England, clinical commissioning groups and local authorities will not be affected by this change. I want to see this commissioning of services to continue to grow. From 1 December, we will also simplify the outdated payments structure; introduce a payment for quality so that for the first time we will be paying pharmacies for the service they provide, not just for the volume of prescriptions they dispense; and relieve pressure on other parts of the NHS by properly embedding pharmacy for the first time in the urgent care pathway.

As we continue the path of reform, we will be informed both by the review of community pharmacy services being carried out by Richard Murray of the King’s Fund and by other stakeholders such as the Royal Pharmaceutical Society. NHS England is investing £42 million in a pharmacy integration fund for 2016-17 and 2017-18, which will facilitate the movement of the sector faster into value-added services.

Last week, for example, I announced two additional initiatives to improve our offer to patients. First, those who need urgent repeat medicines will be referred by NHS 111 directly to pharmacists—not to out-of-hours GPs as at present. Secondly, NHS England will encourage national roll-out of the minor ailment schemes already commissioned by some CCGs. This is expected to be complete by April 2018.

We are confident that these measures can be implemented without jeopardising the quality of services. In fact, we believe the changes will improve them. To safeguard patient access, we will be introducing a pharmacy access scheme in areas with fewer pharmacies and higher health needs. We are today publishing the list of pharmacies that will be eligible for funding from this scheme. Copies are available on gov.uk and from the Vote Office. The list includes all pharmacies that are more than 1 mile from another pharmacy. Those pharmacies will be protected from the full impact of the reductions.

In addition, we will have a review process to deal with any unforeseen circumstances affecting access, such as road closure. We will also review cases where there may be a high level of deprivation, but where pharmacies are less than a mile from another pharmacy, if that pharmacy is critical for access. This will cover pharmacies that are located in the 20% most deprived areas in England, are located 0.8 miles or more from another pharmacy and are critical for access. Additional funding over and above the base settlement will be made available as needed.

We have already announced NHS England’s proposal significantly to increase the number of pharmacists working directly in general practice. A budget of £112 million has been allocated and will deliver a further 1,500 pharmacists to general practice by 2020.

As Members will know, the Government consulted the Pharmaceutical Services Negotiating Committee and other stakeholders, including patient and public groups. I am grateful for the responses that we received, which reinforced the value of community pharmacy and confirmed its front-line role at the heart of the NHS. The consultation also confirmed that there was a potential for the sector to add even more value. However, we are disappointed by the final response from the PSNC. We endeavoured to collaborate and listened to the committee’s many suggestions over many months, but in the end, sadly, we were unable to reach agreement. Ultimately, the committee’s role is to represent the business interests of its members, and I respect that. My role is to do the right thing for the taxpayer, the patient and the NHS.

Let me end by stating my firm belief that the future for community pharmacy is bright. These vital reforms will protect access for patients, properly reward quality for the first time, and integrate care with GP and other services in a far better way. That is what the NHS needs, what patients expect, and, I believe, what the vast majority of community pharmacists are keen to deliver.

Community pharmacies play a crucial role in our health and social care system: indeed, 80% of patient contact in the NHS is in community pharmacies. The Government’s decision to press ahead with damaging cuts which represent a 12% cut for the rest of the year, on current levels, and a 7% cut in the following year will therefore cause widespread concern and dismay. The public petition that was launched when the funding cuts were first proposed became the largest petition ever on a healthcare issue. It now bears 2.2 million signatures. The message is clear: people want their community pharmacies to be protected.

In the face of unprecedented demands on health and social care services, the importance of local pharmacies is greater than ever. They help to safeguard vulnerable people and signpost them to other services; they are very important to carers; and, crucially, they reduce demand on GPs and out-of-hours services. Do Ministers not recognise the extent of the support that those pharmacies offer, and the impact that their loss will have on communities?

As the Minister said, the Government’s latest funding offer was rejected by the Pharmaceutical Services Negotiating Committee, because it was clear that there was little substantive difference between that settlement and their original proposal in December 2015, and that the outcome would be the same. Earlier this year the Minister’s predecessor, the right hon. Member for North East Bedfordshire (Alistair Burt), said that up to 3,000, or 25%, of community pharmacies could close, and clearly the thousands of remaining pharmacies could be forced to scale down their services. If the Minister does not agree with his predecessor, will he now tell us how many community pharmacies he expects to close as a result of the Government’s cuts? Pharmacies that do survive the cuts will be under significant pressure, which will result in job losses and service reduction. That is putting patient safety and welfare at risk.

The Government’s plans are not only deeply unpopular; they are short-sighted, and will hit the areas with the greatest health inequalities hardest. A study by Durham University has shown that pharmacy clusters occur most in areas of greater deprivation and need. Will the Minister reassure us that the areas of greatest deprivation will not lose pharmacies on which they rely, and will not be disproportionately hit by the cuts? I was not reassured by what he said in his statement.

The cuts will have a significant impact on older people, people with disabilities or long-term illnesses, and, I reiterate, carers, who do not have time to look after their own health and often do not even seek GP appointments. The Minister has said nothing today about releasing an impact assessment. Given that the effect of the cuts is likely to be substantial, with rural, remote and deprived areas most affected, when will we see an impact assessment to justify them?

Community pharmacies help to relieve pressure on our already overstretched health and social care services, and in recent years they have delivered more than 4% of savings for the NHS in cost reduction and quality improvement year on year.

It seems to me that Ministers are ignoring the conclusion of a recent PricewaterhouseCoopers report showing that community pharmacies contribute a net value of £3 billion through just 12 of their services—not all of them; just 12. Therefore, if one in four community pharmacies were to close, that value would be lost and the cost to the NHS would be significantly increased. Has the Minister considered the long-term impact that that will have on other NHS services?

We know that there is concern in many parts of the healthcare sector about these proposals. Can the Minister reassure us that all parts of the health service, including NHS England, support the proposals? Earlier in the week, he said that no community would be left without a pharmacy, but he was then unable to say which pharmacies would close and where. Will he repeat the pledge that no community will be left without a pharmacy?

We recognise the need, as does the Minister, to integrate pharmacy services better with the rest of primary care, but introducing cuts on this scale to community pharmacy services will not improve health services—it will damage them.

Frankly, a lot of that was scaremongering, which does not help what we are doing here and does not help with some of the difficult decisions we have had to make. Those difficult decisions are directed at modernising the service, bringing it up to date, making it much more dynamic in terms of added value and less static in terms of dispensing and all that goes with that.

I will answer some of the specific points that were made. There is a full impact assessment and it will be released immediately after the statement.

The hon. Lady asked about the PwC report. I have said on the record on a number of occasions that the report is an excellent piece of work. It does drive home yet again the value of community pharmacies, which we on the Conservatives Benches and in the Government accept. What it does not address is the extent to which those services could be delivered for less cost to the NHS. That is what I have to address and that is what we have done.

The hon. Lady asked whether NHS England supports the changes we are making. She might have heard the comments made by Simon Stevens, but I will read out, in answer to her question, a quote from the chief pharmaceutical officer of NHS England:

“NHS England, as the national commissioner of community pharmacy services in England, can reassure the public that the efficiencies which are being asked of community pharmacy will be manageable and there is sufficient funding to ensure there are accessible and convenient NHS pharmacy services in every community in England.”

The answer to that question is, I do not know. It is possible that none will close. I do not believe that 3,000 will close. However, I would say this. The average operating margin that the pharmacy makes on the numbers that I quoted earlier is 15%. That is after salaries and rent. The cuts that we are making, or the efficiencies that we are asking for, are significantly lower than that. Of course there is no such thing as an average pharmacy, which is why I cannot guarantee that there will be no changes. What I can say is that, if there are mergers and if there is some consolidation, that demand does not go away—it goes to the other pharmacies in the cluster. To say that those pharmacies will be put under more pressure is plain wrong.

I say again that what we are doing is building an industry that is fit for the future, that is modern and that is adding value in a way it has not been able to do in the past.

Order. Two points. First, Members who arrived after the start of the statement should not expect to be called. Secondly, there is extensive interest in this important statement—interest that I am keen to accommodate—but as I emphasised earlier there are to follow two heavily subscribed debates under the auspices of the Backbench Business Committee. Therefore, there is a premium upon brevity. We will be led in our brevity mission by one of the most senior and illustrious Members of the House, Sir Alan Haselhurst.

Does my hon. Friend the Minister acknowledge that the NHS has become such a part of the nation’s DNA that doctors’ surgeries are frequently overloaded, that absolutely the right way forward is to have a rational, well-spaced network of pharmacies and that that is of particular importance in rural areas?

I do recognise that. My right hon. Friend made the point that the network is well spaced and that rural areas are protected. I would also make the point that, as I said in my statement, we are recruiting a further 1,500 pharmacists into the GP network. They will also play a big part in that integration.

Are not these cuts the latest evidence of the unprecedented financial pressure the national health service is under? Is it not the case that cutting community pharmacy services is the very last place we should begin, as they take pressure off GP surgeries and hospitals and offer an excellent service? The Government should be investing more in them, not cutting them.

This year we invested a further £5 billion in the NHS, three times the rate of inflation. In June the OECD noted we are now above average in terms of NHS and social care spend in the OECD. However much we spend, it is right we look to do it as efficiently and effectively as possible, to modernise this service and make it better for patients, and that is what we are doing.

The Minister knows my views: I do not think this 4% cut is a wise move. But I do note—and it is important that everybody reports this accurately—that that money is going to stay within the NHS, so it is not a cut. Can the Minister assure us about any incentives for pharmacies in the delivery of public health measures, notably preventive measures?

I thank my right hon. Friend for that comment and reassure her that for the first time we will be allowing pharmacists to access a quality fund, which means that the average pharmacy could earn up to £6,000 or £7,000 over and above what it gets just for dispensing. The fund will include specific measures around public health.

We discussed this on Monday and, as I pointed out, Scotland has had a national minor ailments service, a chronic medicine service and public health prevention for many years within community pharmacies, and we have found them to be very effective. Research showed they could cut 10% of the pressure on GPs and 5% on accident and emergency.

The problem with the Government’s proposal is that it is going to be a bit random; pharmacies are just going to be shutting on the basis that they cannot survive. Should there not be a planned system, to look at and discuss where they should be? It is not just a question of rural or deprived. It is also about transport; a mile away may be a real problem for those who are elderly and frail and for whom there is not a bus going in that direction. I welcome England taking forward these services, but my concern is the way in which it is going to be done; if it is just done due to cuts, it might not give England the answer it really wants.

I thank the hon. Lady for her point. She mentioned Scotland’s minor ailments programme. The announcement I made on that about a week ago was in many ways modelled on the Scottish model, because we know that pharmacies can do much more on minor ailments than at present. That will be commissioned separately from the other things we are talking about today, and paid for separately from the integration fund. We are a little behind Scotland in that regard, and we are going to catch up.

I congratulate the Minister on recognising what Labour failed to: that NHS money is taxpayers’ money and the priority should always be patient care, not the profits of private equity firms. May I further congratulate him on making it clear that those living in our most deprived communities will be protected and have services enhanced as a result of this change, and may I invite him to say more?

I will not say much more because of time constraints, but I thank my right hon. Friend for his comments. He is right to remind the House that this sector is quite concentrated towards public companies. That is not to say there are not some individual pharmacists that will be affected, but about 25% of pharmacies are owned by two or three public companies.

I should declare my interest as chairman of the all-party group on pharmacy. I do not want to speculate about closures, as that has been done already, but if we get to a point where it might make sense for pharmacies to merge in different communities, my understanding is that the regulations are not yet in place for that. Is that true, and, if that is needed, when will it happen?

I congratulate the Minister on his statement. It is worth reminding the House that many urban pharmacies are located in clusters and are very close to one another. It is therefore quite right that we should look at how they are subsidised. I am pleased that, as a result of these savings, he will be looking out for rural pharmacies, which are more dispersed. They are the ones that really need the help.

The access scheme to which I referred will apply to rural and urban pharmacies. Indeed, there is more urban than rural in it, but it will protect rural pharmacies in the way my right hon. Friend mentions.

There is no escaping the fact that this amounts to a significant cut in prevention services, which is what always happens when the finances of the NHS are under pressure. I absolutely accept the need for reform of the financial incentives involved, to ensure that we get the best outcomes from the money being spent, but surely we should be investing more in prevention in order to ensure that the NHS is sustainable.

The quality system that I have mentioned is about potentially investing more in prevention and linking the best pharmacies—the high quality pharmacies—more closely to local authorities, public health schemes and all that goes with that. I make the point again that there is a requirement for efficiency savings, but we do not believe that they will affect access overall. We do not believe that this will affect the public’s ability to use pharmacies as they do now. This will be part of modernising and digitising the service and providing resources for other parts of the NHS that need them very much.

Bearing in mind my responsibility for the difficult equation that my hon. Friend has had to solve by coming to the House this morning, I should like to thank him and welcome his statement, which finally brings clarity to these long discussions. Will he repeat very clearly the Government’s absolute commitment to a strong community pharmacy network and to doing all they can to ensure that the NHS delivers on the essential commissioning of quality services? Looking ahead to the future, now that we have got past this, will he ensure that a good review of community pharmacy services is carried out, so that we can see what value they bring to the NHS? I am sure that, like me, he will find that sector extremely valuable to work with.

I thank my right hon. Friend for his fantastic work with the pharmacy sector. He makes the important point that we are trying to move the sector more into services and added value. The two announcements that I made two weeks ago are part of that, as is the work currently being done by Richard Murray from the King’s Fund. That will inform how we spend the integration money and enable the sector to move more quickly into the sorts of services that my right hon. Friend is talking about.

Allison’s pharmacy in Cockermouth in my constituency helps to promote good health because it has a deep knowledge of the patients and their families. My concern is that, as a small pharmacy, it will be under more pressure from these cuts than the larger ones will be locally. Does the Minister recognise this pressure? Does he also recognise the vital community role that local pharmacies can play?

I repeat that we absolutely recognise the vital role that community pharmacies can play, and we want to make them move towards an even more vital role by providing more services, which is what pharmacies want to do, rather than getting all their money from their dispensing activities, as they do at the moment. High quality pharmacies will be in a position to really prosper in the new world that we are talking about.

I warmly welcome the Minister’s statement. If there are closures, what additional support will be given to the pharmacies that are left, particularly to enable them to take pressure off GPs in the community?

The volume of business is gradually increasing. If a pharmacy in a cluster should close, that business will be redirected to other pharmacies in the cluster. They will then be in a position to expand, take on more people and all the rest of it.

I declare my interest as a type 2 diabetic and as chair of the all-party parliamentary group on diabetes. The Minister is wrong to say that Leicester has too many pharmacies. The fact is that the population demands those services. Instead of making these cuts, why does he not spend that £25,000 on diabetes prevention, thus saving the national health service a huge amount of money in the future?

I have never said that Leicester has too many pharmacies. What I said in answer to the urgent question was that one road in Leicester—Loughborough Road, I think—has 12 pharmacies within half a mile, and that is quite hard to justify.

As for the right hon. Gentleman’s other point about diabetes and long-term conditions, I mentioned the King’s Fund work being done by Richard Murray and addressing long-term conditions is the sort of value-added service that pharmacies need to provide in future. The £42 million integration fund that we have set aside will enable that to happen.

I welcome the news that this Conservative Government are spending £150 million more a year on pharmacies than the last Labour Government and will be paying pharmacies for not only dispensing prescriptions, but their quality of service. In Wealden, pharmacies have the double whammy of being rural and serving an older community, but they provide much-needed services and home deliveries. What news can the Minister share with me that I can share with pharmacies in Wealden?

The news that I can share is that pharmacies that are more than 1 mile apart from each other, many of which will exist in rural constituencies such as the hon. Lady’s, will be largely protected under the scheme.

The Minister was right to describe community pharmacies as the essential front line of the NHS. What assessment has he made of the additional pressures and costs that will be put on other parts of the NHS as a result of this decision?

The King’s Fund study and the £42 million integration fund are directly focused on services and on enabling pharmacies to become more integrated with GPs. In addition, I repeat that 1,500 more clinical pharmacists than we have now will be working for GPs in 2020. That is a huge difference.

I thank the Minister for coming to the House today and welcome his statement and update. It is right to consider improvements, but in doing so I urge him to ensure that the reforms are part of a broader policy on community pharmacies that seeks better to integrate with the NHS the vital services that they provide.

I give the hon. Lady that assurance. She used the word “integration”, which is right at the core of the proposals, as is modernisation. This is a patient-first initiative and we are going to make it happen.

It is interesting that the Minister keeps referring to the evils of major chains, because it is impossible to listen to his statement and not realise that he is talking about supporting big pharmacies. Smaller pharmacies, which do not have such a wide patient base and do not offer such a wide range of services, will suffer. Does he acknowledge that small pharmacies will close as a result of the changes? Will he say more about where the savings will come from?

The scheme that we are putting into place is blind to ownership, so we will not take into account whether a pharmacy is a Boots, a LloydsPharmacy or something smaller. Given the gross margins that are currently being made by the average pharmacy, including smaller ones, I do not believe that the efficiency savings that we are asking for will cause widespread closures. It is scaremongering to imply that.

Those of us who represent constituencies with both remote rural and urban communities understand the difficult issues that the Minister and his Department have wrestled with. Does he agree that this decision is one that would have to be taken by whichever party was in government at the moment because it is right to ensure that the service is modern, efficient and that it represents security for people in rural communities?

My constituency lies within the South Tees clinical commissioning group’s area, which is one of the pilots for the roll-out of the minor ailments service. The scheme was brought in due to the closure of minor injuries units at Guisborough and East Cleveland and medical centres at Park End, Skelton and Hemlington —all in my constituency. We are now seeing a shortfall in national vanguard funding for the minor ailments service and lack of GP provision in the region. What on earth is going on with primary care?

I do not wholly understand the thrust of that question. I assume that the hon. Gentleman, like others in this House, is welcoming the fact that we are rolling out a national system on ailments, delivered by pharmacists. As the hon. Member for Central Ayrshire (Dr Whitford) said, that is the future.

The Government are right to require pharmacies to make efficiencies, as the NHS is. I welcome the pharmacy access scheme, which I hope will help my local village pharmacies. I urge the Government and NHS England to press ahead with rolling out the minor ailments service, because it is important to make the most of the skills and capacity of pharmacies, in order to provide valuable services to patients and to relieve the burden on GPs.

I recognise the difficult decisions the Minister has had to make, but rural pharmacies are going to be particularly hit. He has attempted to sweeten the pill with his access scheme, but it is only a two-year scheme. What support will be forthcoming beyond that?

This is the first time ever that we have given pharmacies a two-year planning horizon; usually, these negotiations relate to a one-year period. After the completion of this period, there will be further negotiations, at which point we will take forward what is right to do.

I congratulate the Minister on the way he has sorted out this mess. Is this unnecessary and wasteful clustering of pharmacies not a direct consequence of the former Labour Government’s broken payment model?

I am not sure that takes us forward, but it is right to say that spending NHS money on payments of £25,000 to many pharmacies within half a mile of one other is the wrong way to spend money when we need more in cancer drugs funds, in GP surgeries and in accident and emergency—that is what we need to be doing.

A large number of rural villages and small towns in my constituency are served by individual local pharmacies, which play an important role in the community. I welcome the Minister’s comments about the access scheme. Will he reassure me that small pharmacies in rural areas such as mine will be among those to benefit from the access protections he has outlined?

Yes, I can reassure my hon. Friend on that. Indeed, I can make the specific point that the 25% that make up the largest pharmacies will not be in the access scheme; it is directed more at smaller pharmacies.

The Minister is right to identify that those areas with fewer pharmacies will benefit from protection, not only because the travel time to a pharmacy will be longer, but because the travel time to all support services will be longer. Will he therefore confirm that pharmacies in my rural constituency will benefit from the access scheme?

I do not have the specifics for my hon. and learned Friend’s constituency in front of me. We have published the full list and it is in the Vote Office, and I am sure that when she has a look at it she will find that some pharmacies in her area are protected.

Not that I know of, but there may well be. The facts are that the £2.8 billion that we currently spend is for services and for disbursing £8 billion-worth of drugs. It is a valuable service, but it is right that we look to see that that money is spent effectively and as effectively as in other parts of the NHS. It is the Government’s job to make sure that every penny that we give the NHS provides maximum value for patients.

May I declare an interest, in that my wife is a community pharmacist? I should therefore probably be cautious in welcoming this statement, for obvious reasons. Will the Minister confirm that the proposals to have a hub-and-spoke model, which would have been even more damaging to community pharmacies, are not part of this step forward?